Insurer sued by California controller

By National Underwriter

National Underwriter

By Arthur D. Postal

A Chicago-based insurer has become the second sued by California’s comptroller for refusing to comply with requests for data needed to determine whether the insurance companies' subsidiaries are complying with California’s unclaimed property laws.

California State Controller John Chiang filed the complaint against the Kemper Corporation, formerly known as Unitrin.

Kemper is the parent company of Mutual Savings and Life Insurance Company, domiciled in Alabama; Reliable Life Insurance Company, domiciled in Oklahoma; Reserve National Insurance Company, domiciled in Missouri; Union National Insurance Company, domiciled in Louisiana; and United Insurance Company of America, domiciled in Illinois.

All the subsidiaries are so-called “debit insurance companies” acquired by Kemper. Debit companies sell small-value life insurance companies through agents who collect payments weekly or monthly. Most of these companies began going out of business in the 1960s.

"Through a series of audits, my office has seen a harmful and systemic trend in the insurance industry that often robs families of life insurance benefits after their loved ones have passed on," Chiang said.

"Kemper has fought to keep its books closed, and refused to show that it has delivered on the company's promises to policyholders and their families. That is simply unacceptable, and my office will hold them accountable to both the law and to their customers," Chang said.

It is the second lawsuit filed against an insurer for failing to allow auditors delegated by the comptroller to determine if its insurance subsidiaries are complying with state unclaimed property laws.

The first suit was filed in May against American National Insurance Company of Galveston, Texas. That company is arguing that currently “in-force policies” are not subject to the controller’s audit and that such data would not be produced “because it has made its own determination that such data will not lead to reportable property,” according to the complaint.

A spokesman for Chiang said proceedings in the American National Insurance Company cases are just starting, and the two sides have had only one court date.

He also said that most insurance companies are complying with the controller’s request for data and are settling with the comptroller in cases where it is deemed the companies had not complied with state escheat laws.

At the same time, a Kentucky judge in May ruled that Kemper and its five subsidiaries must comply with a law enacted by the state in 2012 that requires life insurance companies to check their lists of insureds against the Social Security Administration’s Death Master File.

It also requires insurance companies to take "good faith steps to notify beneficiaries,” according to the court decision.